Updated from 2:16 p.m. EST with new stock prices

Another large batch of rotten news Monday left the financial sector largely down after initially outperforming the less impressive major indices earlier in the day.

The

NYSE

Financial Sector Index finished down 0.4% at 8,442.18 following last week's harrowing free fall, which was kicked off by

Citigroup's

(C) - Get Report

warning of

enormous fourth-quarter writedowns and the ouster of CEO Chuck Prince.

Today, shares of the bank were trading higher even though CIBC Capital Market cut the entire U.S. big-bank sector to sector underweight on capital ratio concerns, sentiments similar to those voiced in its market-sinking

individual Citi downgrade earlier this month.

Fellow sector members

Wachovia

(WB) - Get Report

and

Bank of America

and

(BAC) - Get Report

also got their numbers cut at Goldman Sachs -- respectively, for full-year earnings and price target -- on CDO (collateralized debt obligation) concerns.

Goldman cited just-disclosed subprime CDO writedowns at Wachovia unit Golden West; BofA, meanwhile, predicted on Friday that "significant dislocations" in the CDO market will adversely impact fourth-quarter financials. In the same vein,

JPMorgan Chase

(JPM) - Get Report

warned that tough market conditions could hit its CDO and subprime-related positions in the current quarter.

Wachovia shares were down 0.4% to $40.59; BofA was unchanged at 43.98; and JPMorgan was up 0.2% at $42.39. The KBW Bank Index sharply outperformed, ramping up 1.2% to 94.70.

Falling was

Fremont General

( FMT) after the beleaguered former subprime lender appointed several executives from Commercial Capital Bancorp, a thrift firm that was taken out by

Washington Mutual

(WM) - Get Report

last year. Among others, former CCBI Chief and co-founder Stephen Gordon is now CEO of Fremont, and Thea Stuedli has been made CFO. Shares of the Santa Monica, Calif., company fell 0.4% to $2.43.

E*Trade

(ETFC) - Get Report

shares were

losing more than half their value on a Citigroup downgrade to sell. The analyst cited a higher "probability of a run on the bank" after the online broker on Friday disclosed that it has seen a "

significant decline" in the value of its asset-backed CDO and second-lien securities since Sept. 30, when the total exposure was valued at roughly $450 million.

The New York firm also said that the

Securities and Exchange Commission

had begun an "informal inquiry" into its loan and securities portfolios. Shares were plunging $5.04 to $3.55.

Blackstone

(BX) - Get Report

was sliding after the asset manager

posted a third-quarter loss, reversing a year-ago profit, due to heavy costs related to its initial public offering in June. The loss came to $113.2 million, or 44 cents a share. Revenue totaled just $526.7 million, far under the $765 million average analyst estimate from Thomson Financial. Shares were off $2.02, or 8.3%, to $22.26.

Meanwhile, Lehman Brothers lowered mortgage investors

Fannie Mae

( FNM) and

Freddie Mac

( FRE) to equal weight from overweight on broad housing-market worries -- pulling shares down 4% and 4.1%, respectively -- and insurer

Manulife

(MFC) - Get Report

lost 2.5% on a cut to outperform from top pick at RBC Capital Markets.

Elsewhere, commodities exchange

Nymex

( NMX) gave up 4% after announcing that it agreed to pay about $52 million for a 15.1% stake in

Imarex

, a financial-derivatives exchange based in Norway. Nymex is buying the interest from Bermuda oil-tanker operator

Frontline

(FRO) - Get Report

. Nymex was losing $5.06 to $121.83. Frontline lately receded 5%.